Profiting from differences in the price of a single currency pair that is traded on more than one market.

Ask

The price at which sellers are willing to sell a currency pair, also known as the ‘offer’, ‘ask price’.

Aussie

Dealer slang for the AUD/USD currency pair.

B

Bar Charts

A popular format for studying the price action of currency pairs

Base Currency

In terms of Forex Market trading, currencies are quoted in terms of a currency pair. The first currency in the pair is the base currency. The base currency is the currency against which exchange rates are generally quoted in a given country. Examples: USD/JPY, the US Dollar is the base currency; EUR/USD, the EURO is the base currency.

Bear Market

An extended period of general price decline in the market.

Bid

The price at which an investor can place an order to buy a currency pair; the quoted price where an investor can sell a currency pair. This is also known as the ‘bid price’ and ‘bid rate’.

Big Figure

The first two or three digits of a foreign exchange price or rate. Examples: USD/JPY rate of 108.05/10 the
big figure is 108. EUR/USD price of 1.1325/28 the big figure is .13

British Pound

The term British pound is commonly used in less formal contexts, although it is not an official name of the currency of the United Kingdom. The full, official name, pound sterling, (plural: pounds sterling) is used mainly in formal contexts and also when it is necessary to distinguish the United Kingdom currency from other currencies with the same name.

Broker

An agent, who executes orders to buy and sell currencies and related instruments either for a commission or on a spread. Brokers are agents working on commission and not principals or agents acting on their own account. In the Forex market brokers tend to act as intermediaries between banks bringing buyers and sellers together for a commission paid by the initiator or by both parties. There are four or five major global brokers operating through subsidiaries affiliates and partners in many countries.

Bull Market

A market which is on a consistent upward trend.

Buy Limit Order

An order to execute a transaction at a specified price (the limit) or lower.

C

Cable

Cable is a slang Forex Market term used for the GBP/USD currency pair rate (British pound vs the US dollar). The name is derived from when the British Pound was more dominant and the currency was continually wired between North America and Europe via transatlantic cable.

Candlestick Chart

A chart that displays the daily trading price range (open, high, low and close). A form of Japanese charting that has become popular in the West. A narrow line (shadow) shows the day’s price range. A wider body marks the area between the open and the close. If the close is above the open, the body is white (not filled); if the close is below the open, the body is black (filled).

Commission

The fee that a broker may charge clients for dealing on their behalf.

Consumer Price Index (CPI)

A month to month economic indicator which gauges changes in the cost of living by measuring price changes in a common basket of goods and services that most people use, such as food, clothing, transportation, and entertainment.

Correlation

A statistical term that refers to a relationship between two seemingly independent things. In forex for example, one could argue that the Euro and the Sterling have a higher correlation than, for example, the Euro and the Brazilian Real.

Currency Pair

The two currencies in a foreign exchange transaction. The “EUR/USD” is an example of a currency pair.

D

DAX

Deutsche Aktien Xchange, Germany’s primary stock index.

Day Trader

A trader who tries to profit from short-term price movements, often taking and closing a position within the same trade day.

Dealing Desk

Used loosely as the place where dealers facilitate pricing and executing trades.

Depreciation

When the value of a particular currency falls substantially.

Depth of Market

The volume of buy and sell orders waiting to be transacted for a particular currency pair at a particular point in time.

E

Electronic Communication Network (ECN)

An electronic communication network (ECN) is the term used in financial circles for a type of computer system that facilitates trading of financial products outside of stock exchanges. The primary products that are traded on ECNs are stocks and currencies. FX ECNs broker provide access to an electronic trading network, supplied with streaming quotes from the top tier banks in the world. By trading through an ECN broker, a currency trader generally benefits from greater price transparency, faster processing, increased liquidity and more availability in the marketplace.

European Central Bank (ECB)

Established in Frankfurt in 1998, the ECB is responsible for all monetary policy decisions that influence the Euro currency. Based on the Maastricht Treaty, the ECB’s main responsibility is to ensure price stability. To this end, it is authorized to issue the Euro and is responsible for setting interest rates for those countries that have converted to the Euro.

Exotic

As opposed to the major currencies which are heavily traded, exotics are the less traded currencies.

F

Federal Open Market Committee (FOMC)

Committee made up of Federal Reserve members who meet eight times a year to discuss current monetary policy and its effect on the present economy, and to address any possible changes needed.

Federal Reserve

The Central Bank of the United States.

Federal Reserve Board

Forward

A transaction that settles at a future date.

Fundamental Analysis

The study of economic factors (GDP, Trade Balance, Employment, and so on) that can influence prices in financial markets.

Futures

An obligation to exchange a good or instrument at a set price on a future date. The primary difference between a Future and a Forward is that Futures are typically traded over an exchange while forwards are traded over the counter (OTC).

G

G7

The seven leading industrialized countries.

G8

G7 and Russia.

GBP

The GBP is currency code for British Pound, commonly called the pound. The currency symbol for pound is £.

Good-Till-Сancelled order (GTC)

A type of limit order that remains in effect until it is either executed (filled) or cancelled, as opposed to a day order, which expires if not executed by the end of the trading day. A GTC option order is an order which if not executed will be automatically cancelled at the option’s expiration.

H

Hedge

A term used to describe reducing risk associated with adverse market movements by using two counterbalancing investments, thereby minimizing any losses caused by price fluctuations. For example, if you sell a house in Holland to relocate to the UK (your new base currency), you are in a long Euro (EUR) position and short Pounds Sterling (GBP). To offset this position you would need to sell the equal amount of EUR to make up for the short GBP position.

I

Initial Margin

The first deposit by a customer which determines a corresponding maximum trade size.

Initial Margin Requirement

When entering a position, the minimum amount that must be paid in cash.

Interest Rate

The rate charged or paid for the use of money. An interest rate is expressed as an annual percentage of the principal. Interest rates often change as a result of inflation and Central Bank policies.

Introducing Broker

A person or firm that introduces customers to the broker often in return for commission or a portion of the spread.

J

JPY

Japan’s currency code.

K

Kiwi

Traders term for the New Zealand Dollar.

L

Leverage

The ratio of margin to the maximum position size. With a deposit of $5000 and a leverage of 50:1, a trader could enter a position with a face value of $250,000. The high degree of leverage can work against you as well as for you. Trading leveraged products is not suitable for all investors.

Limit Order

An order to transact at a specified price or better.

Line Chart

The simplest form of charting, a line chart plots a series of lines connecting the various price levels over a specified time period.

Liquidity

Term used to describe a market where there are lots of buyers and sellers generating a great deal of volume.

Long

When a currency pair is long, the first currency is bought while the second currency is sold short. To go long on a currency means that you buy it.

Lot

Standardized method of trading in forex which requires a trade of 100,000 units of a particular currency.

M

Margin

The minimum deposit required to maintain an open position. For example, with an open position of $500,000 and a leverage of 100:1, the required margin would be $5,000.

Margin Call

A notification that more funds must be deposited into an account because the value of the account has fallen below the minimum margin needed to cover the size of existing positions.

Maximum Leverage

The biggest position that a margin deposit would cover. At a leverage of 50, one could enter a maximum leveraged position of $100,000 by depositing $2,000 worth of margin.

MetaTrader 4

MetaTrader 4 is the cutting-edge online trading platform designed by MetaQuotes Software Corp. to provide brokerage services to customers in Forex, CFD and Futures markets.

Method of smoothing out data on price charts so that trends are easier to spot. Average refers to a mathematical average or a statistical mean that is plotted over the original curve.

N

Net Position

Currency positions that have not been offset with opposite positions.

News Trader

An investor who bases his/her decisions on the outcome of a news announcement and its impact on the market.

NFP

Non-Farm Payroll. Reported monthly, this figure represents the total number of paid U.S. workers of any business, excluding farm employees, general government employees, private household employees, and employees of nonprofit organizations that provide assistance to individuals. The NFP report also includes estimates of the average work week and average weekly earnings of all non-farm employees.

NOK

Currency symbol for the Norwegian Krone.

NZD

NZD is the currency symbol for the New Zealand Dollar.

O

Offer

Also known as the Ask Price, it is the price at which a seller is willing to sell.

Options

The right, but not the obligation, to buy (long call) or sell (long put) an underlying asset.

Order

Instructions to buy or sell.

Oscillators

Technical analysis tools that provide buy and sell signals, characterized by a signal that oscillates between overbought and oversold levels.

One Cancels the Other Order (OCO)

Two orders that are submitted simultaneously. If either one is executed, the other one is automatically canceled.

P

Pip

The smallest upward or downward price movements quoted in forex. In EUR/USD, a movement of 0.0001 is one pip. In USD/JPY, a movement of 0.01 is one pip (for example, from 116.32 to 116.31 yen).

Producer Price Index (PPI)

An economic indicator that gauges the month-to-month price change that producers receive for their output.

Q

Pip

When both a bid and ask price are provided for a currency pair.

R

Rate

Price at which a currency can be purchased or sold against another currency.

Resistance

Price level at which technical analysts note persistent selling of a currency.

Risk Management

The use of strategies to control or reduce financial risk. An example is a stop-loss order that minimizes maximum loss.

S

Sell Limit Order

An order to execute a transaction only at a specified price (the limit) or higher.

Sell Stop

A limit order with a limit placed below the current market price. Once triggered, the limit order becomes a market order.

Short

Selling a currency pair that involves being short the base currency and long the quote currency, with the intent of buying the currency pair at a later time when prices are lower in order to make a profit.

Short Position

In Forex Market, when a currency pair is sold, the position is said to be short. It is understood that the primary currency in the pair is ‘short’, and the secondary currency is ‘long’.

Spot

Buying and selling forex with the current date’s price for valuation, but where settlement usually takes place in two days.

Spread

The value difference between the bid and ask price of a currency pair.

Sterling

Another name for the British Pound (GBP). The full, official name, pound sterling, (plural: pounds sterling).

Stop Loss Order

Order to buy or sell when a given price is reached or passed to liquidate part or all of an existing position.

Sterling

Another name for the British Pound (GBP). The full, official name, pound sterling, (plural: pounds sterling).

Stop Loss

A limit order to close a position when a given limit is reached. When long, the stop loss order is placed below the current market price. When short, the stop loss order is placed above the current market price.

Stop-buy

A buy order for a currency price that is above the current market, or current price. It becomes a market order when the specified price is reached.

Swap

A transaction that moves the maturity date of an open position to a future date.

T

Take Profit

A limit order that is placed above the market with a long position or below the market with a short position. When the market reaches the limit price, the position is closed thereby locking in a profit.

A software application used for trading forex, usually over the Internet.

Trailing Stop Loss

Similar to a stop loss in that it limits potential losses in an open order. But unlike a simple stop loss where the threshold does not change, a trailing stop loss can be instructed to automatically adjust the limit price closer to the market price when the market price moves in your favor.

Transaction

Buying or selling a currency pair.

Trend

The current direction of the market, whether up or down or sideways (which is sometimes referred to as non-trending or trading market).

U

Unit

A widely used quantity of currency. In Forex, one unit of USD is equal to one United States dollar, while one unit of EUR is one euro. For JPY, one unit is equivalent to one yen. One unit is the smallest trade size in Forex.

US Dollar

The currency of the United States of America.

V

Volatility

Measure of how much the price of a currency changes over time.

W

Whipsaw

Slang for a condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.

Wire Transfer

Electronic transfer of funds from one bank to another.

X

XAG

A currency symbol of silver. It is precious metal with the highest electrical conduction properties of any metal. It is used mainly in jewelry, photography, and for scientific and industrial purposes. It has been used as the basis for currencies in the past. Silver is traded as a commodity on various security exchanges. Like many precious metals, silver is volatile but generally maintains relatively high prices.

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All information contained on this website may be subject to change at any time. The use of this website constitutes acceptance of our Client Agreement and other documents regulating provision of our services, which you may find here. Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The trading may result in loss of all investment funds. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of risk and risk appetite. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial adviser if you have any doubts. BullBearMarkets only executes transactions and does not provide any investment recommendations and/or advice. All information, including but not limited to market information, posted on this website does not constitute any investment recommendation and/or advice. BullBearMarkets does not guarantee the reliability, accuracy, timeliness, completeness and/or corrections of this information. BullBearMarkets does not guarantee any results of decisions taken on the basis of this information. BullBearMarkets shall not be liable for any loss and damage which may directly or indirectly arise from the use of or reliance on this information. In certain jurisdictions, the provision of our services and dissemination of information contained on this website may be prohibited or restricted by applicable law. Our services and information are not addressed to the people from this jurisdictions. The user of this website shall make sure that the use of our services and information does not violate the legal prohibitions and restrictions in his/her place of residence. BullBearMarkets shall not bear liability for the use of its services and information by a person from the place where activities of BullBearMarkets is prohibited or restricted by applicable law. The user is solely responsible for complying with all applicable laws in the relevant jurisdiction.